2. "The decision in IATA v Ansett Australia Holdings (2008) 82 ALJR 419;  HCA 3 allows contracting parties to ignore the effect of the pari passu rule to the detriment of general creditors". Discuss and examine the reasoning in the case.
One of the principle aims of insolvency law is to provide an equal, fair and orderly procedure in handling the affairs of insolvents ensuring that creditors receive an equal and equitable distribution of the assets of the debtor. This is the pari passu (equal sharing) principle, which is generally regarded as being the foremost principle of insolvency law. The rule operates to ensure that creditors of the same priority receive an equal percentage return from the insolvents company’s assets. However, there are often many exceptions to the principle that overcome it such that there are often few assets to be shared, equally or not. Although not in the nature of a secured creditor, a creditor may enter into an arrangement with a debtor company that subsequently goes into liquidation that serves to give that creditor priority rights outside the liquidation. This can apply in clearing house arrangements in certain industries where payments between members of the clearing house are dealt with by mutual set off; in insolvency terms such an arrangement serves to negative the debtor/creditor relationship in respect of the obligations to which the arrangements apply. ‘Ansett collapsed on 12 September 2001 and administrators were appointed. It was then a member of the IATA Clearing House, which pays out airlines for services provided to other airlines in accordance with agreements between IATA and the airlines, including Ansett. International airlines regularly carry passengers and goods on behalf of other airlines. The Clearing House avoids the necessity for the airlines to make and receive numerous payments for such operations. Each month, airlines with a net credit balance receive a
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